Green Bonds: Improving their contribution to the low-carbon and climate resilient transition

2 March 2018 - Climate Report - By : Morgane NICOL / Ian COCHRAN, Phd

To achieve the Paris Agreement’s objective of limiting the rise of global mean temperature to +2°C compared to the preindustrial period, a shift in the allocation of private finance flows from carbon-intensive activities to investments compatible with a 2°C pathway will be necessary. Given the often high expectations around bonds, it is thus important to understand the role that this financial instrument can play in financing low-carbon, climate resilient
(LCCR) investments, and how the green bond market can help bonds contribute to directing additional flows towards LCCR assets.

This report looks at the challenges and opportunities to ensure financial additionality of the green bond market – and consists of three parts. The first part explores what categories of low-carbon, climate-resilient investment needs could theoretically be financed by bonds and where main financing gaps are lying. Second, the report analyses if the labelled green bond market could contribute in directing additional bond financing to LCCR investments in the
future. Third, the report suggests and briefly analyzes some market-led and public-led measures that could help boost the contribution of the green bond market to the financing of the low-carbon transition. The different policies options are described and analyzed in varying detail in the report’s annexes.

This report transparently assumes that the overall objective of developing the green bond market is to support the LCCR transition, and thus to bring additional benefits to LCCR assets compared to non-labelled climate-aligned bonds. Rather than only analyzing what measures could help accelerate the development of the green bond market, this study assesses how the development of the labelled green bond market could contribute in “shifting the trillions” and aligning financial flows with the objectives of the Paris Agreement as per its Article 2.1.c. It finally draws conclusions that could be applicable for other green instruments and provides a brief overview of how public policy might push for a better ‘mainstreaming’ of climate issues into financial decision-making.

This research program was supported by the Climate Works Foundation.

The full report and the executive summary for both reports are available below.

The results of WP2 are availabile here: Report 2. Environmental integrity of green bonds: stakes, status and next steps.

 

To learn more
  • 01/18/2023
    The limitations of voluntary climate commitments from private financial actors

    Private finance will not fund the transition without a stronger commitment from public authorities.
    For several years, and particularly since COP 26, considerable time and attention has been dedicated to the subject of voluntary commitments from private financial actors. These commitments, made within the framework of international initiatives, should in principle enable private finance to be mobilized for the transition to a carbon neutral economy.

  • 11/25/2022 Foreword of the week
    Financial regulators must stenghen their game

    One year ago the creation of the Glasgow Finance Alliance for Net Zero – GFANZ – was announced. The expectations were as big as the numbers: a coalition gathering 500 financial actors representing 130 trillion dollars. Private financial actors were finally stepping in and mobilizing. But one year later, the coalition raises many doubts. On one side it faces criticism from NGOs, and on the other some US actors are considering leaving the coalition under the pressure of members of Republicans Party.  

  • 11/24/2022
    Implementing prudential transition plans for banks: what are the expexted impacts?

    The European Union has made rapid progress on the issue of transition plans for companies and banks. First of all, the CSRD directive obliges each listed company to publish its plan for achieving carbon neutrality by 2050. Published by EFRAG this summer, the standards set for these plans can be considered ambitious and commensurate with the challenges they face. With regards to banks, it is now clear that they will be required to publish their transition plan. What remains under debate is whether these transition plans should be integrated into prudential regulations, which would open the way to numerous possibilities of action and sanctions by supervisors.

See all publications
Press contact Amélie FRITZ Head of Communication and press relations Email
Subscribe to our mailing list :
I register !
Subscribe to our newsletter
Once a week, receive all the information on climate economics
I register !
Fermer